Net income fell 26 percent to $337 million, or 72 cents a
share, from $458 million, or 96 cents, a year earlier, the
Louisville, Kentucky-based company said yesterday in a
statement. Excluding certain items, profit was 70 cents a share.
Analysts estimated 60 cents, the average of 25 projections
compiled by Bloomberg.

Chief Executive Officer David Novak is trying to lure U.S.
consumers with new food at Taco Bell as the company’s China
business struggles to recover from concerns about chicken
quality. Sales at U.S. stores open at least 12 months rose 2
percent in the quarter. Analysts projected a 1.9 percent gain,
the average of 22 estimates from Consensus Metrix. U.S.
comparable-store sales for Taco Bell climbed 6 percent.

“Taco Bell is still strong -- the cool-ranch Doritos Locos
Tacos had a positive impact and carried the weaker sisters,”
Larry Miller, an Atlanta-based analyst at RBC Capital Markets,
said in an interview yesterday. He rates the shares the
equivalent of buy.

In the U.S., Taco Bell has recently advertised Doritos
Locos Tacos, a new steak burrito and dessert items to help boost
sales. KFC also is rolling out new foods in the U.S., including
boneless chicken, to compete with chicken nuggets at Burger King
Worldwide Inc. and McDonald’s Corp.

‘Additional Problem’

It’s also good that Yum reaffirmed full-year guidance
“despite the additional problem of avian flu” in China, Miller
said.

Yum rose 7 percent to $68.65 at the close in New York, the
biggest gain since Oct. 10. The shares have advanced 3.4 percent
this year, while the Standard & Poor’s 500 Restaurants Index has
increased 12 percent.

The recent outbreak of bird flu is curbing demand for KFC
food in China, where Yum last year got about half of its
revenue. KFC’s same-store sales in China dropped 24 percent in
the first quarter. For the China division, they’re expected to
decline 30 percent in April, the company said in the statement.
Yum, which has more than 5,400 stores in the Asian nation, is
scheduled to release the China division results on May 10.

‘Properly Cooked’

“We continue to remind consumers that properly cooked
chicken is perfectly safe to eat,” Novak said in the statement.
“Historically, the sales impact of Avian flu publicity has
initially been dramatic at KFC but relatively short-lived.”